Across the Digital Nation

Already, 2002 has presented some dramatic circumstances for state and local governments. The continued economic slowdown has had a profound impact on government revenue, and the aftershocks of Sept. 11 have significantly altered budget projections for several key jurisdictions, including California, Florida and New York.Consequently, many senior executives are working on revised spending plans, creating new budget priorities and examining which program areas will be reduced.In many respects, however, there are specific areas of government spending that are considered safe from the uncompromising ax of fiscal discipline. Historically, political officials have spared areas such as education and public safety from dramatic spending reductions. Given the value of information technology implementation, state and local governments must ensure that important technology development is properly funded and implemented.There are numerous factors that will drive IT spending even in this tight fiscal environment. First, from tax and permit collection to parking ticket and child support enforcement, information technology has proven to be a vital tool in capturing revenue, increasing compliance and streamlining service delivery. Technology initiatives within general services, taxation and motor vehicle agencies can help create a more advantageous fiscal picture for many public-sector organizations.Second, given the events of Sept. 11, the federal government will play an integral role in shaping new technology investments over the next 18 months. The Office of Homeland Security will undoubtedly work with state and local governments to modernize and integrate technology systems within law enforcement, emergency response and justice agencies.Similarly, the Department of Health and Human Services will establish data networks and alert systems with health agencies to detect incidents of bioterrorism, manage outbreaks and coordinate response.Third, when compared to the private sector, state and local governments still fall woefully short of traditional IT investment metrics. For example, financial services and communications organizations typically spend 7 percent to 10 percent of annual revenue on technology implementation. In contrast, public-sector organizations are usually in the 0 percent to 3 percent range. Consequently, there is still significant growth ahead in technology spending if public-sector organizations adopt more private-sector behaviors.Fourth, the second half of the year will feature an economic recovery. This will spur revised budget projections and provide senior leadership with new flexibility in government spending. Although the traditional funding cycle for technology projects is 12 months, a revitalized economy may provide the impetus to speed specific projects that had been temporarily delayed.State and local governments are already using two specific tools to help bridge revenue shortfalls and prepare for the necessary spending ahead. Given the new resource requirements in labor and human service agencies, rainy-day funds established during welfare reform will provide a short-term injection to offset increased use of public services. Second, bonds are the traditional mechanism by which state and local governments raise funds. In the past, innovative jurisdictions, such as Massachusetts, have floated bonds specifically for developing IT projects.Over the next year, alternative bonds tied to projected revenue from tobacco-related settlements are another possible revenue stream to help bridge budget gaps.In this evolving environment, vendors must be cognizant of basic market conditions. In many respects, this difficult time is a tremendous opportunity for vendors to show senior leadership their value. Key strategic advice today can reap tremendous long-term public-private partnerships.